Pensions UK is calling for a definition of pensions adequacy that combines a minimum threshold with target replacement rates. It also wants to see the creation of a National Council for Retirement Adequacy to regularly review the pensions system. 

In its response to the Pensions Commission’s interim report published in May, Pensions UK said that “the absence of a unifying framework has had tangible consequences for policy development, making it inherently difficult to calibrate key system levers such as contribution rates, the role and level of the State Pension, and the interaction with the means-tested benefits system”.  

To change this, it proposes combining absolute and relative measures for pensions adequacy. A minimum income threshold should be set that is based around the association’s Retirement Living Standards, measured as a proportion of median earnings, which Pensions UK expects to be around 32% for a couple. It said those expecting to live alone or rent in retirement will need to save more.  

In addition, there should be a set of target replacement rates “to ensure that individuals with middle and higher incomes can achieve a level of income consistent with their pre-retirement living standards”. Middle and higher earners are currently on track to have lower replacement rates than lower earners. 

  

An independent National Council for Retirement Adequacy should then review the minimum adequacy threshold and wider pensions system every five years, the group proposes.  

“Today Pensions UK is calling for a clear national framework for retirement adequacy, with a minimum income threshold that gives policymakers, employers and savers a shared goal to work towards,” said Zoe Alexander, executive director of policy and advocacy.  

  

“The pensions industry is focused on maximising the value of every pound invested by savers, employers and the government. But we cannot deliver retirement adequacy without system change to increase saving rates. Working together with government, we see huge potential to deliver the economic and social benefits that will come from supporting the next generation of retirees to achieve the living standards they expect,” she added.  

Pensions UK continues to call for higher auto-enrolment contributions, currently at just 3% from employers and 5% from employees. It said this should rise to 6% each “by 2035 at the lates”, being “the most urgent” of the auto-enrolment design proposals.  

It wants to bring the growing number of self-employed people, of whom only 17% currently save for a pension, into the system. 

  

“We would like to see serious engagement with and by HMRC to explore how the tax system could be deployed to get self-employed people saving: this will take concerted effort by relevant parts of government to deliver serious and systematic cross-departmental collaboration and delivery,” the association said. “We are also supportive of trials exploring how digital tools and platforms that are commonly used by self-employed people could be used to support more systematic saving. If this is done, the pensions industry will need to be ready to provide high quality, good-value products that will meet the needs of a new generation of self-employed savers.” 

The group is also urging the government to reform the triple lock – not ending it now but replacing it with a ‘living standards safeguard’ once it has reached a minimum income threshold of at least 32% of median earnings. To be on the 50th centile in annual net equivalent disposable household income before housing costs in 2025, a couple without children would need £37,500, while a couple with two children under 14 would need £52,500. 

Under Pensions UK’s proposal, the state pension would be uprated taking into account the minimum income level, smoothed earnings and inflation linking, and through regular reviews.  

Meanwhile, the Association of Consulting Actuaries, also responding to the Pensions Commission’s report, wants to see a more stable pensions tax framework, better targeted education and digital support, wider use of sidecar savings, an extension of auto-enrolment, support for collective defined contribution as a mainstream retirement model, and reform of the state pension. 

 

Saye Mkangama, who chairs the ACA’s Adequacy Working Group, said: “Our report focuses on practical reforms that can improve outcomes without relying solely on higher employer contribution rates. That means rebuilding trust in the system, making engagement more relevant and accessible, using inertia more effectively, and exploring delivery models that can provide better outcomes for the same cost.”